Newcrest Mining’s disastrous year has ended with a record $5.
78 billion loss, and now its boss says his most important priority is to fix his company’s shattered reputation.
Australia’s largest gold miner has been punished by investors, halving its share price.
Chief executive Greg Robinson said he was concerned the market did not trust the company.
Adding to the bad publicity is an investigation by the Australian Securities and Investments Commission and a possible shareholder class action, following allegations it breached disclosure rules.
A series of broker downgrades in June were made in the days leading up to its flagged write-downs and a corporate restructure, raising suspicions that selected analysts had been told about it before the market.
Newcrest denies those claims, but Mr Robinson acknowledged that all of those issues had been damaging.
“Naturally there is reputational damage about the other issues … in the fullness of time the corrective actions around those will become apparent,” he told reporters.
“If you’re talking about trust in the operational objectives and the (production) numbers we’ve put out … I think people feel that we haven’t delivered against those objectives.
“I think the principal reputation piece is bringing back Newcrest’s reputation as delivering against the public objectives it really sets for the business – there’s nothing more important for us in this next 12 months.”
The damage can be seen in the $8 billion wiped from its market capitalisation this year and $20 billion in the last two years as its share price has fallen.
Its shares were up 91 cents, or 7.9 per cent, to $12.39 on Monday.
The chief culprit for $6.23 billion in write-downs was its Lihir project in PNG with its maintenance and production problems, with more than $3.5 billion wiped from its value compared to the $9.45 billion it paid for it in a better gold market in 2010.
Nearly $1.3 billion was written off its Telfer mine in the Pilbara in WA, which has been plagued by poor productivity and high costs not helped by the fact it has to compete for labour with iron ore mines.
The news was mostly in bad in terms of the 2012-13 result, with Mr Robinson saying it had been a “difficult year” for Newcrest.
Excluding the writedowns, the underlying profit of $451 million was less than half last year’s $1.08 billion result and below analysts’ expectations for $485 million.
That occurred because production was 8.0 per cent down at 2.11 million ounces, the gold price was weaker and sales were weaker while its costs went up.
Mr Robinson said the company would slash costs this year, including reducing capital expenditure by $1 billion to $800 million, having already cuts its workforce by nearly 4000 people, partly due to scaling back operations and growth.
Morningstar analyst Mathew Hodge said the gold mining industry was reaching a tipping point unless prices improved, because there would be no incentive to develop new mines.